Lauren Sherrell Kaywood

In 1999 a movie called "The Bachelor" debuted in theaters. The plot involved a young man who unexpectedly learns he will inherit $100 million if he is married by his 30th birthday, which happens to be the very next day.

The young man spends the majority of the film attempting to find a bride. Although the movie was panned by critics and audiences alike, it illustrates the power of estate planning documents. Presumably the young man's grandfather had a trust with a contingency provision — a gift of $100 million contingent on the beneficiary's marriage by 30 years old.

Many would agree that a provision demanding marriage by 30 years old or forfeit an inheritance is an unreasonable requirement. However, there are plenty of good reasons for trusts that contain constructive provisions. Though they may be less exciting for big screen adaptation.

What is a trust?

What exactly is a trust? And how do you know if you need one?

Very simply, a trust disposes of (distributes) everything you own to the people you name as beneficiaries and in increments that may extend many years after your death. By comparison, a simple will disposes of everything you own shortly after you die.

In general, a will is a simple instrument, whereas a trust can be complex. For example, a will may direct that your antique desk goes to your cousin, Joe, and your two dogs to your niece, Sally. Everything else you own will be split equally between your three children. A trust on the other hand may specify that the antique desk goes to Joe, your dogs to Sally, but everything else will be split between your three children provided they have graduated from college. Prior to graduating, your children may only use the funds for college expenses and once they graduate they may take the remainder of what's left, in equal portions.

Do you need a trust? Six things to consider

Now that you have a basic understanding of what a trust is, how do you know if you need one? The answer to this question can be complicated and is certainly subjective.

1. Irresponsible (or young) family members. One good reason to have a trust is to protect irresponsible family members. Although persons under 18 will not receive outright cash distributions, it would be unwise to bequeath large inheritances to young adults who may not have the life skills to handle valuable estate assets. Even more concerning are family members who may struggle with addictions. An inheritance with no parameters can turn out to be the opposite of a blessing. A trust can restrict not only who and when, but how an inheritance is received. Trusts can control assets to ensure your loved ones are taken care of in a way that is responsible and wise.

2. Blended families or family conflict. Multiple marriages and children from different relationships are circumstances that can make a trust an appealing option. In Tennessee, a person's spouse has the right to a percentage of his or her estate once the person dies. Sometimes this results in hard feelings between children of former relationships. A trust can solve this problem by designating certain assets for specific individuals, regardless of the trust-maker's marital status. Similarly, disgruntled family members and family conflict that could result in contested wills can often be prevented by setting up a trust.

3. Incapacity. A trust can also designate who will care for you and your property if you become incapacitated. If you live long enough, you may have difficulty driving, paying your bills, and generally caring for yourself. A trust is the proper place to name individuals to take over those responsibilities.

4. Taxes. Tax planning via trust preparation can be critical if you believe you may be liable for inheritance taxes. Most people prefer the the federal government take as little possible in potential inheritance taxes. We would much rather have everything we own go to loved ones. Not long ago, the threshold for inheritance taxes was fairly low. This meant that people could have relatively small estates and still be subject to inheritance taxes. Things have changed. With exemption thresholds of about $11 million per person ($22 million per couple), most people do not have to worry about taxes after they die.

5. Probate costs. Another big reason that many people choose a trust over a will is to avoid or reduce probate costs. If you have a will, it must be probated. Probate costs can vary and are often based on estate size (the value of everything you have when you die). As you can see, the more you own at death the higher the probate fees. Going through a full probate may result in less of your estate going to your loved ones. A properly set up trust can eliminate probate fees.

6. Privacy. Not only must a will be probated but it is also considered a public document once it is filed with the court. If you prefer that your estate remain private, you will want to consider a trust. Trusts do not get filed with a probate court and are not considered public documents.

In summary, it is crucial that you have some type of estate plan. And if you already have a will or a trust then you are ahead of most people. Not everyone needs a trust. But there are circumstances in which you may be better suited with a trust over a will and vice versa.

Lauren Sherrell Kaywood is a senior vice president and trust services advisor for Pinnacle Financial Partners.